SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 12(b) or (g) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 2010
Commission File Number 0-17555
THE EVEREST FUND, L.P.
(Exact name of registrant as specified in its charter)
Iowa 42-1318186
State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1100 North 4th Street, Suite 143, Fairfield, Iowa 52556
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (641) 472-5500
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer. See definition of
accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange
Act. (Check one): Large accelerated filer Accelerated filer
Non-accelerated filer
Small Reporting Company Filer X
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Act). Yes No X
Table of Contents
Part I: Financial Information
Item 1. Financial Statements 4
Statements of Financial Condition 4
June 30, 2010 (Unaudited) and December 31, 2009 (Audited)
Condensed Schedule of Investments 6
June 30, 2010 (Unaudited)
Condensed Schedule of Investments 7
December 31, 2009 (Audited)
Statements of Operations 8-10
For the Six and Three Months Ended June 30, 2010 and 2009 (Unaudited)
Statements of Changes in Partners' Capital (Net Asset Value) 11-13
For the Six Months Ended June 30, 2010 and 2009 (Unaudited)
Statements of Cash Flows
For the Six Months Ended June 30, 2010 and 2009 (Unaudited) 13-15
Notes to Financial Statements June 30, 2010 15
Item 2. Management's Discussion and Analysis of Financial 34
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about 40
Market Risk
Item 4. Controls and Procedures 40
Part II: Other Information 40
Item 1. Legal Proceedings 40
Item 1A. Risk Factors 41
Item 2. Unregistered Sales of Equity Securities and Use 41
of Proceeds
Item 3. Defaults upon Senior Securities 42
Item 4. Submission of Matters to a Vote of Security Holders 42
Item 5. Other Information 42
Item 6. Exhibits 42-43
2
PART I. FINANCIAL INFORMATION
Item 1 Financial Statements
Following are f Financial Statements for the six months ended June 30, 2010
EVEREST FUND, L.P.
(An Iowa Limited Partnership)
STATEMENTS OF FINANCIAL CONDITION
JUNE 30, 2010 (UNAUDITED) AND DECEMBER 31, 2009 (AUDITED)
UNAUDITED AUDITED
JUNE 30, 2010 DECEMBER 31, 2009
----------------- -----------------
ASSETS
Cash and cash equivalents $12,182,486 $13,926,125
Equity in broker trading accounts:
Cash and cash equivalents 1,006,625 271,494
Net unrealized trading gains(losses)
on open contracts 630,251 150,735
Interest receivable 18,857 47,952
----------------- ----------------
TOTAL ASSETS $13,838,219 $14,396,306
=============== ================
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Redemptions payable $79,069 $144,670
General partner management fee payable 60,550 73,529
Advisor's management fee payable 22,017 23,342
Advisor's incentive fee payable 0 0
O&O Payable 4,951 0
Accrued expenses 67,570 70,229
----------- ------------
TOTAL LIABILITIES 234,157 311,770
----------- ------------
PARTNERS' CAPITAL
Limited partners, A Shares (4,534.8759
and 4,730.8865 units outstanding) 13,604,063 14,084,536
------------- ------------
TOTAL PARTNERS' CAPITAL 13,604,063 14,084,536
------------- ------------
TOTAL LIABILITIES AND PARTNERS'
CAPITAL $13,838,219 $14,396,306
============= ============
The accompanying notes are an integral part of this statement.
3
EVEREST FUND, L.P.
(AN IOWA LIMITED PARTNERSHIP)
CONDENSED SCHEDULE OF INVESTMENTS
JUNE 30, 2010
UNAUDITED
EXPIRATION NUMBER OF MARKET % OF PARTNERS'
DATES CONTRACTS VALUE (OTE) CAPITAL
---------------- --------- ------------ --------------
LONG POSITIONS:
FUTURES POSITIONS
Interest rates Sep 10 110 $348,993 2.57%
Metals Aug 10-Sep 10 46 115,330 0.85%
Agriculture Sep 10-Dec 10 82 99,910 0.73%
Currencies Sep 10-Jun 11 80 75,200 0.55%
Indices Mar 11 27 (14,022) -0.10%
----------- ---------- ----------
Total long positions 625,411 4.60%
SHORT POSITIONS:
FUTURES POSITIONS
Interest rates Sep 10 6 11,527 0.08%
Energy Sep 10-Oct 10 31 26,451 0.19%
Agriculture Oct 10-Dec 10 90 17,662 0.13%
Currencies Sep 10 20 (50,800) -0.37%
----------- ---------- -----------
Total short positions 4,840 0.04%
----------- -----------
TOTAL OPEN CONTRACTS 630,251 4.63%
=========== ===========
The accompanying notes are an integral part of this statement.
THE EVEREST FUND, L.P.
(an Iowa Limited Partnership)
CONDENSED SCHEDULE OF INVESTMENTS
December 31, 2009
AUDITED
Unrealized
% of(Loss)
Expiration Number Partners' On Open
Date of Contracts Capital Contracts
________ ____________ _________ __________
Long U.S. Futures Contracts
Interest rates Mar10 - Sept10 55 -0.16% ($22,705)
Energy Apr 10 10 -0.15% (21,390)
Agriculture Mar 10 116 1.06% 149,919
Indices Mar 10 14 0.21 % 29,410
---------- ----------
Total Long Futures Contracts 0.96 % 135,234
---------- ----------
Short U.S. Futures Contracts
Interest rates Mar 10 26 -0.05% (7,078)
Energy Mar 10-Apr 10 8 -0.21% (29,800)
Agriculture Mar 10 88 0.16 % 23,110
Currencies Mar 10 43 0.21 % 29,269
---------- ----------
Total Short Futures Contracts 0.11 % 15,501
---------- ----------
Total Futures Contracts 1.07 % $150,735
========== ==========
The accompanying notes are an integral part of these financial statements.
5
EVEREST FUND, L.P.
(AN IOWA LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009
UNAUDITED
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 2010 JUNE 30, 2009
-------------------- -------------------
TRADING INCOME (LOSS)
Net realized trading gain(loss)
on closed contracts $69,249 $(493,559)
Change in net unrealized trading gain
(loss) on open contracts 477,946 (584,035)
Net foreign currency translation loss (10,334) (6,272)
Brokerage Commissions (23,432) (18,925)
-------------------- -------------------
NET TRADING INCOME (LOSS) 513,429 (1,102,791)
Interest income, net of cash management fees 31,058 79,507
---------------- -------------------
TOTAL INCOME (LOSS) 544,487 (1,023,284)
---------------- -------------------
EXPENSES:
General partner management fees 369,764 506,445
Advisor Management fees 131,265 132,636
Incentive fees 0 0
Administrative expenses 55,140 83,622
---------------- -------------------
TOTAL EXPENSES 556,169 722,704
---------------- -------------------
NET INCOME (LOSS) $(11,682) $(1,745,988)
================ ===================
NET INCOME (LOSS) PER UNIT OF PARTNERSHIP INTEREST
A SHARES, OUTSTANDING ENTIRE PERIOD $6.69 $(363.72)
================ ===================
The accompanying notes are an integral part of these statements.
EVEREST FUND, L.P.
(AN IOWA LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2010 AND 2009
UNAUDITED
THREE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, 2010 JUNE 30, 2009
-------------------- ----------------------
TRADING INCOME (LOSS)
Net realized trading gain(loss)
on closed contracts $1,095,389 $(280,859)
Change in net unrealized trading gain
(loss) on open contracts 20,505 163,237
Net foreign currency translation loss (12,741) (2,370)
Brokerage Commissions (11,706) (10,145)
------------------- --------------------
NET TRADING INCOME (LOSS) 1,091,447 (130,138)
Interest income, net of cash management fees 13,014 36,534
------------------- --------------------
TOTAL INCOME (LOSS) 1,104,461 (93,604)
------------------- --------------------
EXPENSES:
General partner management fees 180,892 240,233
Advisor Management fees 65,695 62,928
Incentive fees 0 0
Administrative expenses 26,412 47,854
------------------- --------------------
TOTAL EXPENSES 272,999 351,015
------------------- --------------------
NET INCOME (LOSS) $(831,462) $(444,619)
=================== ====================
NET INCOME (LOSS) PER UNIT OF PARTNERSHIP INTEREST
A SHARES, OUTSTANDING ENTIRE PERIOD
$(185.50) $(98.13)
=================== ====================
The accompanying notes are an integral part of these statements.
6
EVEREST FUND, L.P.
(An Iowa Limited Partnership)
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE SIX MONTHS ENDED JUNE 30, 2010
UNAUDITED
UNITS LIMITED PTRS
A SHARES A SHARES TOTAL
---------- ---------------- ------------
BALANCES, January 1, 2010 4,730.89 14,084,536 14,084,536
Additional Units Sold 252.60 745,000 745,000
Redemptions (424.22) (1,206,415) (1,206,415)
Less Offering Costs -- (7,376) (7,376)
Net Loss -- (11,682) (11,682)
----------- --------------- -------------
BALANCES, June 30, 2010 4,559.26 $13,604,063 $ 13,604,063
=========== =============== =============
Net asset value per unit,
January 1, 2010 $2,977.15
Net profit (loss) per unit 6.69
------------
Net asset value per unit
June 30, 2010 $2,983.83
============
The accompanying notes are an integral part of these statements.
EVEREST FUND, L.P.
(An Iowa Limited Partnership)
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE SIX MONTHS ENDED JUNE 30, 2009
UNAUDITED
UNITS LIMITED PTRS
A SHARES A SHARES TOTAL
------------- ------------- ------------
BALANCES, January 1, 2009 4,940.65 18,713,395 18,713,395
Additional Units Sold 13.34 50,000 50,000
Redemptions (351.66) (1,258,919) (1,258,919)
Less Offering Costs -- (49 (495)
Net Loss -- (1,745,988) (1,745,988)
------------ ------------- -------------
BALANCES, June 30, 2009 4,602.33 $15,757,993 $15,757,993
============ ============= =============
Net asset value per unit,
January 1, 2009 $3,787.64
Net profit (loss) per u (363.72)
-------------
Net asset value per unit
June 30, 2009 $3,423.92
=============
The accompanying notes are an integral part of these statements.
7
EVEREST FUND, L.P.
(An Iowa Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009
UNAUDITED
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 2010 JUNE 30, 2009
--------------------------- ----------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income(loss) $(11,682) $(1,745,988)
Adjustments to reconcile net income(loss) to net cash
used in operating activities:
Unrealized gain or loss on open commodity
futures contracts (479,516) 583,879
Decrease (increase) in interest receivable 29,095 (25,334)
Decrease (increase) in other receivable -- ---
(Decrease) increase in incentive fees payable -- (885,100)
(Decrease) increase in management fees payable (1,325) (6,615)
(Decrease)increase in General Partner management
fees payable (12,979) (9,928)
(Decrease) increase in O&O Expense 4,951 --
(Decrease) increase in other accrued expenses (2,659) (14,235)
---------------- --------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (474,115) (2,103,320)
---------------- --------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption of partnership units (1,272,017) (1,391,801)
Partner addition of units,net of offering costs 737,624 49,505
---------------- --------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (534,393) (1,342,296)
---------------- --------------------
NET INCREASE (DECREASE)IN CASH AND CASH EQUIVALENTS (1,008,508) (3,445,616)
CASH AND CASH EQUIVALENTS, AT BEGINNING OF PERIOD 14,197,619 19,265,788
---------------- --------------------
CASH AND CASH EQUIVALENTS, AT END OF PERIOD $13,189,111 $15,820,172
================ ====================
END OF THE YEAR CASH AND CASH EQUIVALENTS CONSIST OF:
Cash in broker trading accounts $1,006,625 $15,779,446
Cash and cash equivalents 12,182,486 40,726
----------------- --------------------
TOTAL END OF THE YEAR CASH AND CASH EQUIVALENTS $13,189,111 $15,820,172
================= ====================
The accompanying notes are an integral part of these statements
EVEREST FUND, L.P.
NOTES TO FINANCIAL STATEMENTS
June 30, 2010
(1) GENERAL INFORMATION AND SUMMARY
The Everest Fund, L.P., formerly Everest Futures Fund, L.P. (an Iowa
Limited Partnership), (the "Partnership'') is a limited partnership
organized in June 1988, under the Iowa Uniform Limited Partnership Act
(the "Act'') for the purpose of engaging in the speculative trading of
commodity futures and options thereon and forward contracts (collectively
referred to as "Commodity Interests''). The sole General Partner of the
Partnership is Everest Asset Management, Inc. (the "General Partner'').
On July 1, 1995, the Partnership recommenced its offering under a
Regulation D, Rule 506 private placement. The private placement offering
is continuing at a gross subscription price per unit equal to net asset
value (NAV) per unit, plus an organization and offering cost reimbursement
fee payable to the General Partner, and an ongoing compensation fee equal
to 3% of the net asset value of Class A Units sold. The Class A Units
(retail shares) continue to be charged an initial 1% Offering and
Organization fee as a reduction to capital.
The Partnership clears all of its futures and options on futures trades
through Newedge USA, LLC. (NE), its clearing broker, and all of its
foreign currency trading through Newedge Group an affiliate of NE.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
Commodity futures contracts, forward contracts, physical commodities,
and related options are recorded on the trade-date basis and realized
gains or losses are recognized when contracts are liquidated. All
such transactions are recorded on the identified cost basis and marked
to market daily. Unrealized gains or losses on open contracts (the
difference between contract trade price and market price) are reported
in the statement of financial condition as a net unrealized gain or
loss, as there exists a right of offset of unrealized gains or losses
in accordance with the Financial Accounting Standards Board
Interpretation No. 39 - "Offsetting of Amounts Related to Certain
Contracts." Any change in net unrealized gain or loss from the preceding
period is reported in the statement of operations. Fair value of
exchange-traded contracts is based upon exchange settlement prices.
Fair value of non-exchange-traded contracts is based on third party
quoted dealer values on the Interbank market.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Cash and Cash Equivalents
Cash equivalents represent short-term highly liquid investments with
maturities of 90 days or less at the date of acquisition. The
Partnership maintains deposits with high quality financial institutions
in amounts that are in excess of federally insured limits; however, the
Partnership does not believe it is exposed to any significant credit risk.
Redemptions Payable
Pursuant to the provisions of FASB ASC 480, Distinguishing Liabilities
from Equity, redemptions approved by the General Partner prior to month
end with a fixed effective date and fixed amount are recorded as
redemptions payable as of month end.
Fair Value of Financial Instruments
The financial instruments held by the Company are reported in the statements
of financial condition at fair value, or at carrying amounts that approximate
fair value, due to their highly liquid nature and short-term maturity.
Foreign Currency Translation
The Partnership's functional currency is the U.S. dollar, however, it
transacts business in currencies other than the U.S. dollar. Assets and
liabilities denominated in foreign currencies are translated at the
prevailing exchange rates as of the date of the statement of financial
conditions. Gains and losses on investment activity are translated at the
prevailing exchange rate on the date of each respective transaction while
period end balances are translated at the period end currency rates. Realized
and unrealized foreign exchange gains or losses are included in trading
income or loss in the statements of operations.
Income Taxes
No provision for income taxes has been made in the accompanying financial
statements as each partner is responsible for reporting income (loss)
based upon the pro rata share of the profits or losses of the Partnership.
The Partnership files U.S. federal and state tax returns.
Recently adopted accounting pronouncements
Financial Accounting Standards Board ("FASB") Accounting Standard
Codification ("ASC") 820, Fair Value Measurements and Disclosures
("ASC 820" and formerly referred to as FAS-157), establishes a framework
for measuring fair value in GAAP, clarifies the definition of fair value
within that framework, and expands disclosures about the use of fair
value measurements. ASC 820 is effective for fiscal years beginning after
November 15, 2007. ASC 820-10-65, Transition and Open Effective Date
Information, deferred the effective date of ASC 820, for non-financial
assets and liabilities that are not on a recurring basis recognized or
disclosed at fair value in the financial statements, to fiscal years,
and interim periods, beginning after November 15, 2008. The Partnership
has adopted the guidance within ASC 820 for non-financial assets and
liabilities measured at fair value on a nonrecurring basis at
January 1, 2009 and will continue to apply its provisions prospectively
from January 1, 2009. The application of ASC 820 for non-financial assets
and liabilities did not have a significant impact on earnings nor the
financial position of the Partnership.
FASB ASC 815, Derivatives and Hedging ("ASC 815"), ASC 815-10-65,
Transition and Open Effective Date Information ("ASC 815-10-65"and
formerly referred to as FAS-161) includes a requirement for enhanced
disclosures about an entity's derivative and hedging activities and
thereby improves the transparency of financial reporting. ASC 815 is
effective prospectively for fiscal years beginning after
November 15, 2008. The application of ASC 815 did not have a significant
impact on earnings nor the financial position of the Partnership.
FASB ASC 855, Subsequent Events ("ASC 855" and formerly referred to
as FAS-165), modified the subsequent event guidance. The three
modifications to the subsequent events guidance are: 1) To name
the two types of subsequent events either as recognized or
non-recognized subsequent events, 2) To modify the definition
of subsequent events to refer to events or transactions that occur
after the balance sheet date, but before the financial statement are
issued or available to be issued and 3) To require entities to
disclose the date through which an entity has evaluated subsequent
events and the basis for that date, i.e. whether that date represents
the date the financial statements were issued or were available to be
issued. The adoption of FASB ASC 855, did not have a material affect
on the Partnership's financial position.
Effective January 1,2009 the Partnership adopted SFAS No. 161,
Disclosure about Derivative Instruments and Hedging Activities.(See note 6)
(3) FAIR VALUE OF FINANCIAL INSTRUMENTS
Effective January 1, 2008, the Partnership adopted FASB ASC 820
(formerly Statement of Financial Accounting Standard No. 157, Fair
Value Measurement), issued by the FASB. ASC 820 defines fair value
as the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the
measurement date and sets out a fair value hierarchy. The fair value
hierarchy gives the highest priority to quoted prices in active markets
for identical assets or liabilities (Level 1) and the lowest priority to
unobservable inputs (Level 3). Inputs are broadly defined under
ASC 820 as assumptions market participants would use in pricing
an asset or liability. The three levels of the fair value hierarchy under
ASC 820 are described below:
Level 1. Unadjusted quoted prices in active markets for identical assets
or liabilities that the reporting entity has the ability to access at
the measurement date.
Level 2. Inputs other than quoted prices within Level 1 that are observable
for the asset or liability, either directly or indirectly; and fair value
is determined through the use of models or other valuation methodologies.
A significant adjustment to a Level 2 input could result in the Level 2
measurement becoming a Level 3 measurement.
Level 3. Inputs are unobservable for the asset or liability and include
situations where there is little, if any, market activity for the asset
or liability. The inputs into the determination of fair value are based
upon the best information in the circumstances and may require significant
management judgment or estimation.
The following section describes the valuation techniques used by the
Partnership to measure different financial instruments at fair value and
includes the level within the fair value hierarchy in which the financial
instrument is categorized. Fair value of exchange-traded contracts is based
upon exchange settlement prices. Fair value of non-exchange-traded contracts
is based on third party quoted dealer values on the Interbank market. These
financial instruments are classified in Level 1 of the fair value hierarchy.
The following table presents the Partnership's fair value hierarchy for those
assets and liabilities measured at fair value on a recurring basis as of
June 30, 2010:
Fair Value Measurements Using
----------------------------------------
Quoted Prices in Significant Significant
Active Markets for Other Unobservable
Identical Assets Observable Inputs Inputs
Total (Level I) (Level II) (Level III)
----------- ------------------ ------------------- --------------
Assets
Cash and equivalents $ 13,189,111 $ 13,189,111 $ - $ -
------------- ----------------- --------------- --------------
Investments
Long Futures
Contracts 625,411 625,411 - -
Short Futures
Contracts 4,840 4,840 - -
--------------- ---------------- --------------- --------------
630,251 630,251 - -
--------------- ---------------- --------------- --------------
Total assets at fair
value $ 13,819,362 $13,819,362 $ - $ -
=============== ================ =============== ==============
The following table presents the Partnership's fair value hierarchy for those
assets and liabilities measured at fair value on a recurring basis as of
June 30, 2009:
Fair Value Measurements Using
----------------------------------------
Quoted Prices in Significant Significant
Active Markets for Other Unobservable
Identical Assets Observable Inputs Inputs
Total (Level I) (Level II) (Level III)
----------- ---------------- --------------- --------------
Assets
Cash and equivalents $15,820,172 $15,820,172 $ - $ -
----------- --------------- --------------- --------------
Investments
Long Futures
Contracts -12,370 -12,370 - -
Short Futures
Contracts 88,137 88,137 - -
------------- -------------- --------------- --------------
75,767 75,767 - -
------------- -------------- --------------- --------------
Total assets at fair
value $ 15,895,939 $15,895,939 $ - $ -
============= ============== =============== ==============
(4) LIMITED PARTNERSHIP AGREEMENT
The Limited Partners and General Partner share in the profits and losses
of the Partnership in proportion to the number of units or unit
equivalents held by each. However, no Limited Partner is liable for
obligations of the Partnership in excess of their capital contribution
and profits, if any, and such other amounts as they may be liable for
pursuant to the Act. Distributions of profits are made solely at the
discretion of the General Partner.
Responsibility for managing the Partnership is vested solely in the
General Partner. The General Partner has delegated complete trading
authority to an unrelated party (see Note 5).
Although the Agreement does not permit redemptions for the first six months
following a Limited Partner's admission to the Partnership, the Agreement
does permit the Partnership to declare additional regular redemption dates.
The Partnership will be dissolved on December 31, 2020, or upon the
occurrence of certain events, as specified in the Limited Partnership agreement.
(5) AGREEMENTS AND RELATED PARTY TRANSACTIONS
John W. Henry & Company, Inc. (JWH) serves as the Partnership's commodity
trading advisor. JWH receives a monthly management fee equal to 0.167%
(2% annually) of the Partnership's month-end net asset value, (as defined),
and a quarterly incentive fee of 20% of the Partnership's new net trading
profits. The incentive fee is retained by JWH even though trading losses
may occur in subsequent quarters; however, no further incentive fees are
payable until any such trading losses (other than losses attributable to
redeemed units and losses attributable to assets reallocated to another
advisor) are recouped by the Partnership.
Effective November 2003, the General Partner charges the Partnership a
monthly management fee equal to 0.50% of the Partnership's Class A
beginning-of-month net asset value.
From the monthly management fee the General Partner deducts the round
turn trading costs and related exchange fees (between $5.80 to
$10.70 per round turn trade on domestic exchanges, and higher for foreign
exchanges) and pays the selling agents and certain other parties, if any,
up to 50% of the fee retained by the General Partner. The General Partner
may replace or add trading advisors at any time.
The clearing agreements with the clearing brokers provide that the clearing
brokers charge the Partnership brokerage commissions at the rate of
between $5.80 to $10.70 per round-turn trade, plus applicable exchange,
give up fees and National Futures Association fees for futures contracts and
options on futures contracts executed on domestic exchanges and over the
counter markets. For trades on certain foreign exchanges, the rates may be
higher.
The Partnership also reimburses the clearing brokers for all delivery,
insurance, storage or other charges incidental to trading and paid to third
parties.
The Partnership earns interest on 95% of the Partnership's average monthly
cash balance on deposit with its clearing brokers at a rate equal to the
average 91-day Treasury Bill rate during that month.
The Partnership has also entered into an investment advisory agreement with
Horizon Cash Management L.L.C. ("HCM''). At June 30, 2010 and 2009
approximately 99.34% and 99.69%, respectively of the partnership's capital were
funds deposited with a commercial bank and invested under the direction of
HCM. HCM receives a monthly cash management fee equal to 1/12 of .25%
(.25% annually) of the average daily assets under management if the accrued
monthly interest income earned on the Partnership's assets managed by HCM
exceeds the 91-day U.S. Treasury bill rate.
(6) DERIVATIVE INSTRUMENTS
In the normal course of business, the Partnership engages in trading
derivatives by purchasing and selling futures contracts and options
on future contracts for its own account. All such trading is effectuated
as speculative as opposed to hedging. Effective January 1, 2009, the
Partnership adopted the provisions of Accounting Standards Codification
815, Derivatives & Hedging, which requires enhanced disclosures about
the objectives and strategies for using derivatives and quantitative
disclosures about the fair value amounts, and gains and losses on derivatives.
See below for such disclosures.
Asset Derivatives
Balance Sheet
Location Fair Value #of contracts
Agricultural
Net unrealized trading gains on open contracts 99,910 82
Currencies
Net unrealized trading gains on open contracts 75,200 80
Metals
Net unrealized trading gains on open contracts 115,330 46
Interest rates
Net unrealized trading gains on open contracts 348,993 110
Indices
Net unrealized trading gains on open contracts -14,022 27
========= ==========
625,411 345
Liability Derivatives
Balance Sheet
Location Fair Value #of contracts Net
Agricultural
Net unrealized trading gains on open contracts 17,662 90 117,572
Currencies
Net unrealized trading gains on open contracts -50,800 20 24,400
Energy
Net unrealized trading gains on open contracts 26,451 31 26,451
115,330Interest rates
Net unrealized trading gains on open contracts 11,527 6 360,520
-14,022 ========= ========= =========
4,840 147 630,251
Trading Revenue for the
Six Months Ended June 30, 2010
Line Item in Income Statement
Realized 35,483
Change in unrealized 477,946
=============
1,513,429
Includes net foreign currency translation gain(loss)
Trading Revenue for the
Three Months Ended June 30, 2010
Line Item in Income Statement
Realized 1,070,943
Change in unrealized 20,505
=============
1,091,447
Includes net foreign currency translation gain(loss)
Total average of futures contracts bought and sold
S six months ended June 30, 2010
Total (292,832)
============
6 month average (48,805)
Total average of futures contracts bought and sold
Three months ended June 30, 2010
Total 742,627
============
3 month average 247,542
For the three months ended June 30, 2010, the monthly average of futures
contracts bought and sold was approximately 247,542.
(7) FINANCIAL INSTRUMENTS, OFF-BALANCE SHEET RISKS AND CONTINGENCIES
The Partnership engages in the speculative trading of U.S. and foreign
futures contracts, options on U.S. and foreign futures contracts, and
forward contracts ("collectively derivatives''). These derivatives include
both financial and non-financial contracts held as part of a diversified
trading strategy. The Partnership is exposed to both market risk, the risk
arising from changes in the market value of the contracts; and
credit risk, the risk of failure by another party to perform according
to the terms of a contract.
The purchase and sale of futures and options on futures contracts requires
margin deposits with a Futures Commission Merchant ("FCM"). Additional
deposits may be necessary for any loss on contract value. The Commodity
Exchange Act requires an FCM to segregate all customer transactions and
assets from the FCM's proprietary activities. A customer's cash and other
property such as U.S. Treasury Bills, deposited with an FCM are considered
commingled with all other customer funds subject to the FCM's segregation
requirements. In the event of an FCM's insolvency, recovery may be limited
to a pro rata share of segregated funds available. It is possible that the
recovered amount could be less than the total of cash and other property
deposited.
For derivatives, risks arise from changes in the market value of the
contracts. Theoretically, the Partnership is exposed to a market risk
equal to the value of futures and forward contracts purchased and unlimited
liability on such contracts sold short. As both a buyer and seller of
options, the Partnership pays or receives a premium at the outset and then
bears the risk of unfavorable changes in the price of the contract
underlying the option.
In the case of forward contracts, over-the-counter options contracts or
swap contracts, which are traded on the interbank or other institutional
market rather than on exchanges, the counterparty is generally a single
bank or other financial institution, rather than a clearinghouse backed
by a group of financial institutions; thus, there likely will be greater
counterparty credit risk. The Partnership trades only with those
counterparties that it believes to be creditworthy. All positions of
the Partnership are valued each day on a mark-to-market basis. There
can be no assurance that any clearing member, clearinghouse or other
counterparty will be able to meet its obligations to the Partnership.
(8) FINANCIAL HIGHLIGHTS
The following financial highlights show the Partnership's financial
performance for the six months ended June 30, 2010 and June 30, 2009.
June 30, 2010 June 30, 2009
------------------- ---------------------
Class A Class A
------------------- ---------------------
Total return before distributions* .22% (9.60)%
=================== =====================
Ratio to average net assets:
Net investment Income (loss)** (3.99)% (3.96)%
=================== =====================
Management fees 2.81% 3.12%
Incentive fees 0% 0%
Other expenses 1.42% 1.33%
------------------- ----------------------
Total expenses** 4.23% 4.45%
=================== ======================
*Not annualized
**Annualized
The following financial highlights show the Partnership's financial
performance for the three months ended June 30, 2010 and June 30, 2009.
June 30, 2010 June 30, 2009
------------------- ---------------------
Class A Class A
------------------- ---------------------
Total return before distributions* 6.63% (2.79)%
=================== =====================
Ratio to average net assets:
Net investment Income (loss)** 4.35% (1.94)%
=================== =====================
Management fees 1.38% 1.48%
Incentive fees 0% 0%
Other expenses 0.70% 0.68%
------------------- ----------------------
Total expenses** 2.08% 2.16%
=================== ======================
*Not annualized
**Annualized
Interim Financial Statements
The statements of financial condition, including the consolidated schedule
of investments, as of June 30, 2010, the statements of operations for
the three and six months ended June 30, 2010 and 2009, the statements of cash
flows and changes in partners' capital (net asset value) for the six
months ended June 30, 2010 and 2009 and the accompanying notes to the
financial statements are unaudited. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with U.S. generally accepted accounting principles may be omitted pursuant
to such rules and regulations. In the opinion of management, such financial
statements and accompanying disclosures reflect all adjustments, which
were of a normal and recurring nature, necessary for a fair presentation
of financial position as of June 30, 2010, results of operations for the
three and six months ended June 30, 2010 and 2009, cash flows and changes in
partners' capital (net asset value) for the six months ended June 30, 2010
and 2009. The results of operations for the full three and six months ended
June 30, 2010 and 2009 are not necessarily indicative of the results to be
expected for the full year or any other period. These financial statements
should be read in conjunction with the audited financial statements and the
notes thereto included in our form 10-k as filed with the Securities and
Exchange Commission.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation
Each months ended June 30, 2010 compared to each months ended June 30, 2009
Class A Units were negative 3.48% in January 2010 resulting in
a Net Asset Value per unit of $2,873.42 as of January 31, 2010.
Class A Units were negative 2.49% in January 2009 resulting in
a Net Asset Value per unit of $3,693.33 as of January 31, 2009.
January performance was a continuation of the sharp market reversals and
directionless patterns seen in late December. While trading these markets
with a long-term trend-following approach has been difficult these past two
months, we believe the underlying trading models are performing as
expected under the circumstances. Everest believes the program's style
discipline will reward clients as trends ultimately emerge from the
currently cloudy and uncertain world markets.
Class A Units were negative 3.62% in February 2010 resulting in
a Net Asset Value per unit of $2,769.41 as of February 28, 2010.
Class A Units were positive 0.94% in February 2009 resulting in
a Net Asset Value per unit of $3,728.18 as of February 28, 2009.
February's performance was a continuation of the difficult market conditions
over the past few months.
The interest rate sector contributed positively to performance for February
as recently established upward trends in Asian and European debt markets
continued throughout February. Trading in the currency markets also provided
positive returns as the U.S. dollar showed signs of continued strength against
the euro, British pound and Swiss franc due to ongoing fiscal weakness across
Europe.
The Fund's performance in equity indices was slightly negative in February
as global stock markets gyrated throughout the month. Trading in the metals
sector was unprofitable. The Fund incurred losses in both gold and silver as
the precious metals continued to struggle to find a new direction. There we
some significant rallies and reversals throughout the month and the moves
were generally tied to the performance of the U.S. dollar. The energy sector
was negatively affected as oil prices continued their up and down ride
through the first half of the month. The performance of the agricultural sector
was also negative in February after the sugar market, which rallied 10 percent
in January hitting a 29-year high, sharply reversed course and fell over 17
percent in February.
Class A Units were positive 1.04% in March 2010 resulting in
a Net Asset Value per unit of $2,798.33 as of March 31, 2010.
Class A Units were negative 5.53% in March 2009 resulting in
a Net Asset Value per unit of $3,522.05 as of March 31, 2009.
The Fund's positions in equity index futures were profitable in March. The
energy sector was also profitable, benefiting from intra-sector diversification
and the divergent paths of natural gas and petroleum-based fuel prices.
Crude oil prices rose more than 4 percent during the month as improving
economic activity increased demand for fuel, most notably from China. At the
same time, the domestic natural gas market continues to decline. Natural gas
prices fell close to 20 percent during March, making it the best-performing
market in the Fund as milder than normal weather across the country further
exacerbated the bearish supply/demand dynamic. Performance from the
agricultural sector was positive for the month with a number of markets having
a significant positive impact on performance. Corn fell more than 10 percent
during the month. The sugar market suffered an abrupt reversal, falling more
than 20 percent during the month.
The interest rate sector of the Fund declined in March as bonds continue to
move erratically as global sentiment shifts between default and recovery.
Profits from positions in European interest rates were not enough to offset
losses from U.S. and Japanese positions. The currency sector was slightly
unprofitable during the month as a more broad-based rally in the dollar caught
the program off sides in a few markets. The metals sector was unprofitable in
March amidst directionless trading in the gold and silver markets. Precious
metals fell as the dollar rally continued and the allure of these metals as
a safe haven diminished.
Class A Units were positive 3.01% in April 2010 resulting in
a Net Asset Value per unit of $2,882.66 as of April 30, 2010.
Class A Units were negative 2.76% in April 2009 resulting in
a Net Asset Value per unit of $3,424.69 as of April 30, 2009.
The interest rate sector contributed positively to performance in April
with positions in European futures contracts leading the way. The
turmoil in Greece and the concomitant concerns about credit risk and
the impact the crisis will have on the overall European economy
prompted investors to seek the safety of German government bonds.
While bonds in the U.S. did not enjoy the same rally as those in Europe,
benchmark U.S. 10-year yields did decline from 3.82 percent to 3.65
percent during the month. The developments in Europe were also an
important factor influencing exchange rates during the month. The
trend in interest rate differential also favored the dollar versus the
euro. The Japanese yen and Swiss franc also contributed to the positive
results for this sector. Global stock markets showed signs of diverging
in April. Positions in U.S. equity futures were profitable, but were not
enough to offset losses from European positions. Trading in the metals
sector was profitable with both gold and silver generating a positive
performance. Gold and silver are enjoying status as a safe haven
and benefiting from the destabilizing effects of the European monetary
turmoil. Trading in the energy sector was also profitable in April, with
gains from crude oil and crude oil products outweighing small losses
in natural gas. Crude rallied just over $2.00 for the month and made
a positive contribution to performance. The agriculture sector turned
in mixed performance, as small gains in sugar were not enough to
offset losses from other markets in the sector.
Class A Units were positive 1.98% in May 2010 resulting in
a Net Asset Value per unit of $2,939.63 as of 31, 2010.
Class A Units were positive 5.10% in May 2009 resulting in
a Net Asset Value per unit of $3,599.32 as of May 31, 2009.
The Fund performed well overall, providing a measure of diversification
to its investors during the month.
The interest rate sector was the best-performer for the Fund with positions
in European bonds leading the way. The currency markets also contributed
positively to performance with the euro being one of the top performers in
the sector. While global equity markets declined during the month amidst
higher volatility, the sector was slightly unprofitable as small gains from
positions in European equity futures were not enough to offset the losses
from positions in U.S. and Asian futures. The biggest losses in the Fund
were registered in the energy sector, where both crude and natural gas
suffered from significant trend reversals. Difficult trading conditions were
exacerbated by uncertainty about the long-term fallout for the energy
industry as a result of the oil spill in the Gulf of Mexico. Trading metals
was unprofitable as gains in gold were unable to offset losses from positions
in silver. Gold set an all-time high during the middle of May. The rally in
gold was impressive, considering the gains were made at a time of strength
for the U.S. dollar. The agricultural sector was mixed as gains from wheat
and sugar were not enough to offset losses from other markets in the sector.
Class A Units were positive 1.50% in June 2010 resulting in
a Net Asset Value per unit of $2,983.83 as of June 30, 2010.
Class A Units were negative 4.87% in June 2009 resulting in
a Net Asset Value per unit of $3,423.92 as of June 30, 2009.
The Fund's performance in equity indices was slightly positive in June
as the global stock markets fluctuated with broad rallies during the first
half of the month. However, equity markets began a steady retreat
mid-month. The interest rate sector provided the Fund's best returns
during the month as growing fear of a double-dip recession sent investors
flocking to the relative safety of government debt, despite the low yields.
Trading in the currency markets was unprofitable as the recent dollar
strength rally came to a halt. Trading in the metals sector was profitable in
June as gold rallied to a record high with investors pouring funds into the
market as the double-dip recession fears were revived. Gold profited from
its status as a safe haven as central banks, pension funds and individual
buyers amassed their holdings to shield wealth from Europe's financial
turbulence and uncertainty in the global economy. Gold's performance
was able to offset the losses produced in silver for the month. Trading
in the energy sector was unprofitable for the month as fluctuations in
economic sentiment caused reversals mid-month across the entire complex.
The agricultural sector performance was also slightly negative in June
as the markets lacked a clear direction.
Item 3. Quantitative and Qualitative Disclosures
About Market Risk
There has been no material change with respect to market risk since the
"Quantitative and Qualitative Disclosures About Market Risk" was made in the
Form 10K of the Partnership dated December 31, 2009.
Item 4. Controls and Procedures
As of June 30, 2010 an evaluation was performed by the company under
the supervision and with the participation of management, including
the President of the Company, of the effectiveness of the design and
operation of the Company's disclosure controls and procedures. Based on
that evaluation, the Company's management, including the President, concluded
that the Company's disclosure controls and procedures are effective in timely
alerting them to material information relating to the Company that is
required to be included in the Company's period filings with the Securities
and Exchange Commission. There have been no significant changes in the
company's internal controls or in other factors that could significantly
affect those internal controls subsequent to the date the company carried out
its evaluation.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
Neither the Partnership, nor the General Partner, is party to
any pending material legal proceeding.
Item 1A. Risk Factors
There has been no material change with respect to risk factors since the
"Risk Factors" were disclosed in the Form 10K of the Partnership dated
December 31, 2009.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
RECENT SALES OF UNREGISTERED SECURITIES A UNITS
Six months ended June 30, 2010 Six months ended June 30, 2009
Units Sold 252.60 13.34
Value of Units Sold $745,000 $50,000
1% of the proceeds from the above sales were used to pay the
Partnership's Organization and Offering charge. The remaining 99%
was invested in the Partnership.
See Part I, Statement of Changes in Partner's Capital
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
Exhibit Number Description of Document Page
Number
31 Certification by Chief Executive Officer
and Chief Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 E- 1-2
32 Certification by Chief Executive Officer
and Chief Financial Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 E - 3
b) Reports on Form 8-K
none
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned and thereunto duly authorized.
EVEREST FUND, L.P.
Date: September 21, 2010 By: Everest Asset Management, Inc.,
its General Partner
By:__/s/ Peter Lamoureux_____
Peter Lamoureux
President
1